Q2 2024 OmniAb Inc Earnings Call

Speaker Change: Thank you, operator, and good afternoon, everyone. This is Kurt Gustafson, OmniAb's chief financial officer, and thank you all for joining our second quarter 2024 financial results conference call.

Speaker Change: There are slides to accompany today's prepared remarks and they're available on the investor section of our website at OmniAb.com.

Kurt Gustafson: These forward-looking statements are qualified by the cautionary statements contained in today's press release and our SEC files. Importantly, this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast today, August 8th, 2024, except as required by law. OmniAb undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call.

Speaker Change: Before we begin, as summarized on slide 2, I would like to remind listeners that comments made during this call will include forward-looking statements within the meaning of the federal securities laws. These forward-looking statements involve risks and uncertainties that could cause actual results to be materially different from any anticipated results.

Speaker Change: These forward-looking statements are qualified by the cautionary statements contained in today's press release and our SEC filings.

Speaker Change: Importantly, this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, today, August 8, 2024.

Speaker Change: Except as required by law, OmniAb undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call.

Kurt Gustafson: Joining me on the call today is Matt Foehr, OmniAb's president and CEO. During today's call, Matt and I will provide highlights on the company's operations, partner and technology updates, and our recent financial results. At the conclusion of our prepared remarks, we'll open the call to questions. And with that, I will turn the call over to Matt.

Speaker Change: Joining me on the call today is Matt Foehr, OmniAb's President and CEO . During today's call, Matt and I will provide highlights on the company's operations, partner and technology updates, and our recent financial results.

Speaker Change: At the conclusion of our prepared remarks, we'll open the call to questions. And with that, let me turn the call over to Matt.

Matt Foehr: Thanks, Kurt. Good afternoon, everyone, and thanks for joining us today on our Q2 conference call. I'll pick up the presentation this afternoon at slide number four. During the quarter, we continue to grow our business with the addition of new partnerships. Given the velocity of new deals and a growing book of business, this year has the potential to be our best year ever in new partners and licenses. In parallel, our existing partners continue to advance their programs in the clinic, thereby strengthening our pipeline this year and beyond. We're driving growth in the business with strong execution, and we're doing that within an efficient operating structure and a highly scalable business model.

Matt: Thanks Kurt. Good afternoon everyone and thanks for joining us today on our Q2 conference call. I'll pick up the presentation this afternoon here on slide number four.

Matt: During the quarter, we continue to grow our business with the addition of new partnerships. Given the velocity of new deals and a growing book of business, this year has the potential to be our best year ever in new partners and licenses.

Matt: In parallel, our existing partners continue to advance their programs in the clinic, thereby strengthening our pipeline this year and beyond.

Matt: We're driving growth in the business with strong execution and we're doing that within an efficient operating structure and a highly scalable business model.

Matt Foehr: We intend to create further visibility for our platform through publications and by advancing our technology. And our scientists recently published an important peer-reviewed paper in the Journal of Immunology relating to our OmniDAB single-domain antibody technology, which we launched last November and is now driving a growing number of new partner programs. And I also note that in the second quarter, we successfully demonstrated the efficient multi-site deployability of a next-generation exploration instrument across our lab.

Matt: We intend to create further visibility for our platform through publications and by advancing our technologies.

Matt: And our scientists recently published an important peer-reviewed paper in the Journal of Immunology relating to our OmniDAB single-domain antibody technology, which we launched last November and is now driving a growing number of new partner programs.

Matt: And I also note that in the second quarter, we successfully demonstrated the efficient multi-site deployability of a next-generation exploration instrument across our labs.

Matt Foehr: I mentioned the exploration platform here as it has the potential to drive additional efficiencies for our partner programs and to further expand our position as an industry leader in speed, throughput, reliability, and ease of use for antibody discovery screening activities. We remain committed to the continuous improvement of our technology to meet the evolving and broadening needs of our partners and to retain a leading market position. I'm proud of the achievements of our team and feel confident in our ability to execute our strategy in order to maximize value for all of our stakeholders.

Matt: I mention the exploration platform here as it has the potential to drive additional efficiencies for our partner programs and to further expand our position as an industry leader in speed, throughput, reliability, and ease of use for antibody discovery screening activities.

Matt: We remain committed to the continuous improvement of our technology to meet the evolving and broadening needs of our partners and to retain a leading market position.

Matt: I'm proud of the achievements of our team and feel confident in our ability to execute our strategy in order to maximize value for all of our stakeholders.

Matt Foehr: Now moving to slide number five, I'll start to review some of our business metrics for the quarter. We finished Q2 with 83 active partners. This includes two new platform license agreements that we signed in the quarter. Those are with Dan Bio and Topaz Therapeutics. Notably, Topaz is a company focused on radio conjugates, and they represent the first of what we expect to be multiple partners focused on this space.

Matt: Now moving to slide number five. I'll start to review some of our business metrics for the quarter. We finished Q2 with 83 active partners. This includes two new platform license agreements that we signed in the quarter. Those are with Dan Bio and Topaz Therapeutics.

Matt: Notably, Topaz is a company focused on radio conjugates, and they represent the first of what we expect to be multiple partners focused on this space.

Matt Foehr: I note also that in our earnings release that we issued this afternoon, we expanded our existing successful discovery relationship with Hanall Biopharma and also recently completed new deals with 92Bio and the Memorial Sloan Kettering Cancer Center. As I mentioned, given the velocity of new deals and our growing book of business, this year has the potential to be our best year ever in new partner applications. Now on slide number six, you'll see that our partnership base has grown by 30% over the last two years. And these numbers, I note, are net of attrition.

Matt: I note also that we mentioned in our earnings release that we issued this afternoon that we expanded our existing successful discovery relationship with Hanall Biopharma and also recently completed new deals with 92Bio and the Memorial Sloan Kettering Cancer Center.

Matt: As I mentioned, given the velocity of new deals and our growing book of business, this year has the potential to be our best year ever in new partner ads.

Matt: Now on slide number six, you'll see that our partnership base has grown by 30% over the last two years.

Matt Foehr: The expansion in our partnership base has been driven primarily by the validation of our platform and by new technology launches, as well as, much more recently, by our expanded business development efforts. On the next slide, slide number seven, you can see the distribution of our partners on a geographic basis, linked to their headquarters location. Although I note that many of our partners' development programs are global in scope, our partners are predominantly based here in the U.S., with roughly equal representation between Europe and Asia.

Matt: And these numbers, I note, are net of attrition.

Matt: The expansion in our partnership base has been driven primarily by the validation of our platform and by new technology launches as well as much more recently by our expanded business development efforts.

Matt: On the next slide, slide number seven, you can see the distribution of our partners on a geographic basis, linked to the partner's headquarters location. Although I note that many of our partners' development programs are global in scope.

Matt: Our partners are predominantly based here in the U.S., with roughly equal representation between Europe and Asia.

Matt Foehr: And over the past year, we've expanded our business development presence outside the U.S., and we expect that'll result in greater diversity within our partnership programs at quarter end, net of attrition, with a number of active programs increasing to 333. This represents a net add of six programs on a sequential basis from Q1. During Q2, one program transitioned from discovery to the preclinical stage, one moved from preclinical to Phase I, and a third program advanced from Phase I to Phase III.

Matt: And over the past year, we've expanded our business development presence outside the U.S., and we expect that'll result in greater diversity within our partnership base.

Matt: Slide 8 shows the number of active programs at quarter end, net of attrition.

Matt: With a number of active programs increasing to 333. This represents a net add of 6 programs on a sequential basis from Q1.

Matt: During Q2, one program transitioned from discovery to the preclinical stage, one moved from preclinical to Phase 1, and a third program advanced from Phase 1 to Phase 3.

Matt Foehr: Our partners continue to align and reprioritize their therapeutic programs and pipelines in their normal course of business. For example, in our small-molecule ion-channel programs during Q2, GSK realigned elements of its portfolio and decided to discontinue their work on the small-molecule NAV1.1 sodium-channel modulator program that was for rare epilepsy. GSK continues to advance a separate preclinical stage program with us for neurological diseases. And subsequent to the close of the second quarter, Roche elected to return its rights to a small molecule program targeting KV7.2, following an additional internal portfolio review there. We continue to work with Roche on two additional small molecule ion channel programs for the potential treatment of CNS disorders.

Matt: Our partners continue to align and reprioritize their therapeutic programs and pipelines in their normal course of business.

Speaker Change: In our small molecule ion channel programs, during Q2, GSA re-aligned elements of its portfolio and decided to discontinue their work on the small molecule nav 1.1 sodium channel modulator program that was for rare epilepsy.

Matt: GSK continues to advance a separate preclinical stage program with us for neurological diseases.

Matt: And subsequent to the close of the second quarter, Roche elected to return its rights to a small molecule program targeting KV7.2, following an additional internal portfolio review there.

Matt: We continue to work with Rose on two additional small molecule ions in our programs for the potential treatment of CNS disorders.

Matt Foehr: With our business model and our contractual terms in those deals, the KV7.2 and NAV1.1 small molecule programs are assets that we can re-partner with others in the CNS space. Now, on slide 9, you can see the growth in our partners' pre-clinical and later stage programs, which are some of the programs that we think can be important to near-term and mid-term value generation in our pipeline. We've experienced 39% growth in the number of these programs over the last two years and currently have reached a total of 50 programs at these stages.

Matt: Consistent with our business model and our contractual terms in those deals, the KV7.2 and NAV1.1 small molecule programs are assets that we can re-partner with others in the CNS space.

Matt: Now on slide 9 you can hear the growth in our partners pre-clinical and later stage programs, which are some of the programs that we think can be important to near-term and mid-term value generation in our pipeline.

Matt: We've experienced 39% growth in the number of these programs over the last two years and currently have reached a total of 50 programs at these stages.

Matt Foehr: Our pipeline is robust and growing, and we look forward to our partners' progress as they advance programs into the later stages of clinical development toward the market. As you can see here on slide number 10, as of June 30th, we had 32 active clinical programs and approved products. During the quarter, TAFA entered the clinic with TEV56278, which is an omni-chicken derived PD-1 with IL-2 fusion.

Matt: Our pipeline is robust and it's growing, and we look forward to our partners' progress as they advance programs into the later stages of clinical development towards the market.

Matt: As you can see here now on slide number 10, as of June 30th, we had 32 active clinical programs and approved products.

Tava: During the quarter, Teva entered the clinic with TEV56278, which is an omni-chicken derived PD-1 with IL-2 fusion.

Matt Foehr: Last week, Teva publicly highlighted ex vivo data for this program on their earnings call. Those data showed encouraging anti-tumor T-cell activity, and they stated that they believe the program has the potential to open up additional combo therapy approaches. Based on discussions with our partners, and now with one already in the books, we continue to expect a total of four to six entries into clinical development for novel OmniAb-derived antibodies this year. This next slide, slide number 11, shows the wide and growing range of formats that our antibodies can support.

Matt: Last week, Teva publicly highlighted ex vivo data for this program on their earnings goal.

Matt: Those data showed encouraging anti-tumor T-cell activity, and they stated that they believe the program has potential to open up additional combo therapy approaches.

Speaker Change: Based on discussions with our partners, and now with one already in the books, we continue to expect a total of four to six entries into clinical development for novel OmniAb-derived antibodies this year.

Matt: This next slide, slide number 11, shows the wide and growing range of formats that our antibodies can support.

Matt Foehr: And even though this list is quite broad as it currently stands, as we innovate around the platform and grow our partnership base, we continue to see the number of new formats expand, and although this slide is quite technical, it does really provide a nice illustration of the broad nature and the flexibility of our platform. The most recent new format at the clinical stage is the AdenuKind multi-specific with Teva that I just mentioned and that entered the clinic in Q2. It's shown here on the lower part of the center panel.

Matt: And even though this list is quite broad, as it currently stands,

Matt: As we innovate around the platform and grow our partnership base, we continue to see the number of new formats expand. And although this slide is quite technical, it does really provide a nice illustration of the broad nature and the flexibility of our platform.

Matt: The most recent new format at the clinic stages, the venue kind, multi-specific with Teva that I just mentioned in that entered the clinic in Q2. It's shown here on the lower part of the center panel.

Matt Foehr: Now on slide number 12, I'll highlight a few key recent and Q2 partner updates. GenMab announced initial data from the Phase 2 trial evaluating acosemlamab as monotherapy and in combination with Pembro in patients with PD-L1 positive metastatic non-small cell lung cancer. Data from this ongoing phase two study informs their planned pivotal phase three trial, which is expected to launch before the end of 2024. Stone recently announced European approval of Sugamelumab in combination with chemo as first-line treatment for metastatic non-small-cell lung cancer, which is one of the largest cancer indications and is also among the leading causes of cancer death.

Speaker Change: Now on slide number 12, I'll highlight a few key recent and Q2 partner updates.

Jenna Benauts: GenMab announced initial data from the Phase 2 trial evaluating acosemlamab as monotherapy and in combination with PEMBRO in patients with PD-L1 positive metastatic non small cell lung cancer.

Matt: Data from this ongoing phase 2 study informs their planned pivotal phase 3 trial which is expected to launch before the end of 2024.

Speaker Change: Seastone recently announced European approval of Sugamelumab in combination with chemo as first-line treatment for metastatic non-small-cell lung cancer which is one of the largest cancer indications and is also among the leading causes of cancer death.

Matt Foehr: Also, Seastone announced that it entered into a strategic commercial collaboration with IWA-Pharma. Under the terms of that agreement, IWA-Pharma has the commercial rights to Suga-Melamab in Switzerland and 18 Central and Eastern European countries. The station presented preliminary data from its Phase 1A first-in-human study of CSX1004, which is an investigational antibody for prophylaxis against fentanyl-related overdose, demonstrating that SX1004 is safe and well tolerated under the conditions tested. In addition, and importantly, the exposure data were predictive of efficacy for blocking fentanyl-induced respiratory depression as well.

Matt: Also, Seastone announced that it entered into a strategic commercial collaboration with IWA-Pharma. Under the terms of that agreement, IWA-Pharma has the commercial rights for Suga-Mellumab in Switzerland and 18 Central Eastern European countries.

Speaker Change: Cessation presented preliminary data from its Phase 1A First in Human Study of CSX1004, which is an investigational antibody for prophylaxis against fentanyl-related overdose.

Matt: Demonstrating that CSX 1004 is safe and well tolerated under the conditions tested.

Speaker Change: In addition, and importantly, the exposure data were predictive of efficacy for blocking fentanyl induced respiratory depression as well.

Matt Foehr: As a next step, cessation of planning for a phase two proof of concept study. I mentioned Teva's work earlier, and their clinical start is also highlighted here on this slide. And lastly, TALIC disclosed FDA clearance of its IND application for ALT02, which is a SIRP-alpha-targeting toll-like receptor agonist antibody conjugate for patients with advanced solid tumors. As you can see on slide 13, we look forward to numerous catalysts occurring for the balance of the year and in 2025. This is a subset of publicly disclosed events, and it represents a mix of clinical readouts, clinical starts, and regulatory events.

Speaker Change: At the next step, cessation is planning a Phase II proof-of-concept study.

Speaker Change: I mentioned Teva's work earlier, and their clinical start is also highlighted here on this slide. And lastly, TALIC disclosed FDA clearance of its IND application for ALT02, which is a SIRP-alpha targeting toll-like receptor agonist antibody conjugate.

Speaker Change: in patients with advanced solid tumors.

Speaker Change: As you can hear on slide number 13, we look forward to numerous catalysts occurring for the balance of the year and in 2025.

Speaker Change: This is a subset of publicly disclosed events, and it represents a mix of clinical readouts, clinical starts, and regulatory events.

Matt Foehr: And we continue to be excited about the progress that's being reported by our partners. And my last slide here, slide number 14, provides a current snapshot of the total milestone potential for our pipeline and also calls out those 50 preclinical and later stage programs in our pipeline that I highlighted earlier as near-term and mid-term value drivers. As shown here on the right side of this slide, those 50 programs at the preclinical stage and later have over 550 million in potential milestones to OmniAb.

Speaker Change: And we continue to be excited about the progress that's being reported by our partners.

Speaker Change: And my last slide here, slide number 14, provides a current snapshot of the total milestone potential for our pipeline, and also calls out those 50 preclinical and later stage programs in our pipeline that I highlighted earlier as near-term and mid-term value drivers.

Speaker Change: As shown here on the right side of this slide, those 50 programs at pre-clinical stage and later have over 550 million and potential milestones on the app.

Matt Foehr: And overall, our active antibody programs have over 3 billion potential milestones, and currently, the remaining active small molecule ion channel programs with Roche and GSK have approximately 700 million remaining miles. And with that, I will turn the call back over to Kurt for a discussion of our second quarter financial results.

Speaker Change: And overall, our active antibody programs have over 3 billion in potential milestones, and currently the remaining active small molecule ion channel programs with Roche and GSK have approximately 700 million in remaining milestones.

Speaker Change: And with that, I will turn the call back over to Kurt for a discussion of our second quarter financial results. Kurt? Thanks, Matt.

Kurt Gustafson: Kurt. Thanks, Matt. So I'll provide a brief overview of our financial results for the second quarter and then we'll take some questions. On slide 16, we have our income statement for the second quarter of 2024 versus the year-ago period. Total revenue for the quarter was $7.6 million, compared with $6.9 million in the prior year quarter. This revenue was consistent with our expectations, with the exception of higher service revenue. Matt mentioned the discontinuation of the GSK Small Molecule Ion Channel Program, and this triggered an acceleration of 1.3 million dollars in service revenue, above and beyond what would have otherwise been recognized in the quarter.

Kurt Gustafson: GSK had paid for the service fees up front, which were recorded as deferred revenue and were being amortized over the life of the research term. The discontinuation resulted in the acceleration of this amortization, which would otherwise have been recognized mostly over the next two quarters. As I previously stated, we continue to project milestone payments to be weighted towards the second half of the year based on the information and statements made by our partners.

Kurt Gustafson: So I'll provide a brief overview of our financial results for the second quarter and then we'll take some questions.

Kurt Gustafson: On slide 16, we have our income statement for the second quarter of 2024 versus the year ago period. Total revenue for the quarter was $7.6 million compared with $6.9 million in the prior year quarter.

Speaker Change: This revenue was consistent with our expectations with the exception of higher service revenue.

Speaker Change: Matt mentioned the discontinuation of the GSK small molecule ion channel program and this triggered an acceleration of 1.3 million dollars in service revenue above and beyond what would have otherwise been recognized in the quarter.

Speaker Change: The GSK had paid for the service fees up front, which were recorded as deferred revenue and were being amortized over the life of the research term. The discontinuation resulted in the acceleration of this amortization, which would have otherwise been recognized mostly over the next two quarters.

Speaker Change: As I previously stated, we continue to project milestone payments to be weighted towards the second half of the year, based on the information and statements made by our partners.

Kurt Gustafson: In terms of expenses, our R&D expense was relatively unchanged versus the prior year. G&A expense was $8 million versus last year's $8.7 million, with the decrease primarily due to lower share-based compensation expense as well as non-recurring costs in the prior year associated with our ERP system implementation. The amortization of intangibles in the second quarter was higher than our recent trend.

Speaker Change: In terms of expenses, our R&D expense was relatively unchanged versus the prior year.

Speaker Change: GNA expense was 8 million dollars versus last year's 8.7 million dollars, with the decrease primarily due to lower share-based compensation expense, as well as non-recurring costs in a prior year, associated with our ERP system implementation.

Speaker Change: The amortization of intangibles in the second quarter was higher than our recent trend.

Kurt Gustafson: The increase was due to a $1.2 million impairment related to assets associated with two legacy unpartnered ab initio programs. In addition, other operating income for the quarter included a $2.6 million reduction in contingent liabilities primarily related to changes in the Ion Channel Program. We have CVR obligations that expire in 2027 from our acquisition of icogen, and we accrue these CVR liabilities based on our projections of achieving various milestones. The recent notifications from GSK and Roche resulted in a decrease in our expected obligations for these CVRs, which was then recorded here and other operating instruments.

Speaker Change: The increase was due to a $1.2 million in Perman related to assets associated with two Legacy Unpartnered Abonitial Programs.

Speaker Change: In addition, other operating income for the quarter included a $2.6 million reduction in contingent liabilities primarily related to changes in the Ion Channel programs.

Speaker Change: We have CVR obligations that expire in 2027 from our acquisition of ICAGIN and we accrue these CVR liabilities based on our projections of achieving various milestones.

Speaker Change: The recent notifications from GSK and Roche resulted in a decrease in our expected obligations for these CVRs, which was then recorded here in other operating income.

Kurt Gustafson: Year-to-date, our operating expenses track relatively close to plan. However, we now expect total operating expenses in 2024 to be slightly less than total operating expenses in 2023. Turning to slide 17, here you'll see our balance sheet as of June 30, 2024. We ended the second quarter with $57.2 million in cash, and as we've discussed before, we expect the first half of 2024 to have a higher burn relative to the second half of the year, partly due to the milestone revenue being weighted towards the second half of the year, and partly due to the timing of cash payments from certain operating expense items that occurred in the first Given that we are still tracking close to our original plans, our cash guidance remains unchanged. And with that, I'd like to open the call to questions. Operator.

Speaker Change: Year-to-date, our operating expenses track relatively close to plan. However, we now expect total operating expenses in 2024 to be slightly less than total operating expenses in 2023.

Speaker Change: Turning to slide 17.

Speaker Change: Here you'll see our balance sheet as of June 30th, 2024. We ended the second quarter with $57.2 million in cash. And as we've discussed before, we expect the first half of 2024 to have a higher burn relative to the second half of the year.

Speaker Change: Partly due to the milestone revenue being weighted towards the second half of the year, and partly due to the timing of cash payments from certain operating expense items that occurred in the first quarter.

Speaker Change: Given that we are still tracking close to our original plans, our cash guidance remains unchanged.

Speaker Change: And with that, I'd like to open the call for questions. Operator?

Operator: Thank you, ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchtone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys.

Speaker Change: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star, followed by the one hundred ten million.

Speaker Change: We will hear a prompt that your hand has been raised. Should you wish to apply for the pulling process, please press the star ball by the two. If you're using a speaker phone, please lift the hands at your before pressing any keys. One moment please for your first question.

Operator: One moment, please for your first question. The first question comes from Puntep Souta from Lernick Partner. Puntep, go ahead.

Speaker Change: First question comes from Puntab Suta from Lernick Parker, Puntab Gohead.

Unknown Speaker: Hi, you have my go on for Puneet, grass in a quarter. I think for the first question, I wanted to talk a little bit about the exploration platform. And I mentioned a proof of concept study you've done. I was curious if you could talk about how this distributed format you're looking into fits into your overall offering. And if you could speak to sort of the confidence in the IP since there's been some litigation in the microfluidics, single cell space, we've looked at the platforms and how that works out peacefully.

Michael Lawon: Hi, I have Michael Lawon for to need Grace and a quarter. I think sort of first question I wanted to talk a little bit about the exploration platform. And I mentioned a proof of concept study you've done. I was curious if you could talk about how this distributed.

Speaker Change: format you're looking into fits into your overall offering. And if you could speak to sort of the your confidence in the IP since there's been some litigation sort of the microfluidics single cell space recently.

Unknown Speaker: Yeah, Michael, thanks. Yeah. Thanks for the question.

Speaker Change: Yeah, Michael, thanks. Yeah, thanks for the question. And yeah, the exploration platform is one that's obviously been woven.

Unknown Speaker: And yeah, the exploration platform is one that's obviously been woven into our technology offering for quite a while, you know, going back to acquiring it about four or five years ago. And it is a high-throughput B-cell screening platform that also has, you know, broad applicability to other areas as well, but we've focused really on B-cell screening workflows. And it's one that's driving a lot of efficiency within our business.

Speaker Change: into our

Michael: technology offering for quite a while, you know, going back to acquiring it about four or five years ago. And it is a high throughput B-cell screening platform that also has, you know, broad applicability.

Speaker Change: to other areas as well. But we've focused really on B-cell screening workflows.

Speaker Change: And it's one that's driven a lot of efficiencies within our business. And it's one where we've actually had some of our larger partners inquire with us about getting access to exploration instruments.

Unknown Speaker: And it's one where we've actually had some of our larger partners inquire with us about getting access to exploration instruments. And as we've invested in that platform to increase throughput and speed, we've come to realize that it's actually a form of, you know, something that creates a lot of leverage in the business. You mentioned the IP landscape. You know, for us, this is a microcapillary platform. So from the way in which the equipment is run, it is quite unique.

Speaker Change: And as we've invested in that platform to increase throughput.

Speaker Change: and Speed. We've come to realize that it's actually a form, you know, something that creates a lot of leverage in the business.

Kurt Gustafson: EmniAb's Chief Financial Officer, and thank you all for joining our second 2024 Financial Results Conference call. There are slides to accompany today's prepared remarks, and they're available on the Investor section of our website at OmniAb.com. Before we begin, as summarized on slide two, I would like to remind listeners that comments made during this call will include forward-looking statements within the meaning of the Federal Security's laws. These forward-looking statements involve risks and uncertainties that could cause actual results to be materially different from any anticipated results.

Speaker Change: You mentioned the IP landscape, you know, for us.

Speaker Change: This is a micro capillary platform, so from the way in which the equipment is run, it is quite unique.

Unknown Speaker: And it can actually, beyond being very efficient in screening, it can be paired with deep learning and AI and other things that we've been doing for many years to really increase throughput. So we're excited about the exploration platform. It's something we've obviously invested in over the years and continue to leverage in a variety of ways for our partners.

Speaker Change: And it actually, beyond being very efficient in screening, it can be paired with...

Speaker Change: Deep Learning and AI and other things that we've been doing for many years to really increase throughput. So we're excited about the Exploration Platform. It's something we've obviously...

Kurt Gustafson: These forward-looking statements are qualified by the cautionary statements contained in today's press release and our SEC filings. Importantly, this conference call contains time-sensitive information that is accurate only as the date of the live broadcast. Today, August 8, 2024. Except as required by law, OmniAb undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call.

Speaker Change: have invested in over the years and continue to leverage in a variety of ways for our partners.

Unknown Speaker: Okay, great. And then I was curious, you know, in conversations with new partners or existing partners, if you have any insights on the appetite for discovery programs, given that the first half has been pretty good funding wise, but then there's also a lot of talk about sort of the large pharma companies, and prioritization isn't happening, so I wonder if you could offer some color there.

Speaker Change: Okay, great. And then I was curious, you know, in conversations with new partners or existing partners if you have any insights on.

Speaker Change: I get the appetite for discovery programs, given that the first half has been pretty good funding-wise, but then there's also a lot of talk about sort of the large pharma prioritization that's been happening, so I wonder if you could offer some color there.

Kurt Gustafson: Joining me on the call today is Matt Forr, OmniAb's President and CEO. During today's call, Matt and I will provide highlights on the company's operations, partner and technology updates, and our recent financial results. At the conclusion of our prepared remarks, we'll open the call to questions.

Unknown Speaker: Yeah, yeah, Michael, I can comment, and Kurt can add as needed. Yeah, it's obviously, as students of the industry, you know, it's clear that big pharma continues to go through prioritization exercises, which is natural. That's something that happens on a secular basis within the industry. But, you know, Q2 was quite strong for us in terms of new program starts.

Speaker Change: Yeah, yeah, Michael, I can comment and Kurt can add as needed.

Matt Foehr: And with that, let me turn the call over to Matt. Thanks, Kurt. Good afternoon, everyone. And thanks for joining us today on our Q2 conference call. I'll pick up the presentation this afternoon here on slide number four. During the quarter, we continue to grow our business with the addition of new partnerships. Given the velocity of new deals and a growing book of business, this year has the potential to be our best year ever in new partners and licenses.

Kurt Gustafson: Yeah, it's obviously, as students of the industry, you know, it's clear that Big Pharma continues to...

Kurt Gustafson: go through prioritization exercises, which is natural. That's something that happens on a secular basis within the industry. But, you know, Q2 was quite strong for us in terms of new program starts, and we actually have...

Unknown Speaker: And we actually have quite a variety of partners, right? It's a mix of big pharmas and startups, as well as academic partnerships as well. If I look at the landscape now, as compared to about a year ago, you see some of our, you know, some of our newer partners, who are quite well funded. These are startups that have funding, you know, solid VC funding, interesting biology, differentiated ideas, and they're coming to us to get access to our platform.

Speaker Change: Quite a variety of partners, right? It's a mix of big farmers and startups.

Matt Foehr: In parallel, our existing partners continue to advance their programs in the clinic, thereby strengthening our pipeline this year and beyond. We're driving growth in the business with strong execution, and we're doing that within an efficient operating structure and a highly scalable business model. We intend to create further visibility for our platform through publications and by advancing our technologies. And our scientists recently published an important peer review paper in the Journal of Immunology relating to our on the DAB single domain antibody technology which we launched last November and is now driving a growing number of new partner programs.

Kurt Gustafson: as well as academic partnerships as well.

Kurt Gustafson: If I look at the landscape now as you compare it to about a year ago, you'll see some of our newer partners.

Kurt Gustafson: who are quite well-funded. These are startups that have...

Kurt Gustafson: Funding, you know, solid VC funding, interesting biology, differentiated ideas, and they're coming to us to get access.

Unknown Speaker: And we're definitely seeing that at a higher rate than we saw a year or even two years ago. So that's generally good to see. And I think it is juxtaposed with prioritization exercises that go on at big pharma. But again, I think that's a natural part of the industry.

Matt Foehr: And I also note that in the second quarter, we successfully demonstrated the efficient multi-site deployability of a next generation exploration instrument across our labs. I mentioned the exploration platform here as it has the potential to drive additional efficiencies for our partner programs and to further expand our position as an industry leader in speed, throughput, reliability, and ease of use for antibody discovery screening activities. We remain committed to the continuous improvement of our technology to meet the evolving and broadening needs of our partners and to retain a leading market position. I'm proud of the achievements of our team and feel confident in our ability to execute our strategy in order to maximize value for all of our stakeholders. Partners.

Kurt Gustafson: To our platform, and we're definitely seeing that at a higher rate than we saw a year or even two years ago. So that's generally good to see, and I think it is just supposed with prioritization exercises that go on at Big Pharma. But again, I think that's a natural part of the industry.

Unknown Speaker: Okay, thank you very much.

Speaker Change: Okay, thank you very much.

Operator: The next question will come from Chad Wiatrowski from TD Cohen. Chad, go ahead.

Speaker Change: The next question will come from Chad Wiatrowski from TD Cohen. Chad, go ahead.

Unknown Speaker: Hey guys, this is Chad speaking for Steve Mott. Just looking at the existing programs, there's sort of large downstream milestone potential. How much visibility do you have given the bolus of upcoming partner catalysts in the next 18 months?

Chad Wiatrowski: Hey guys, this is Chad on for Steve Ma. Just looking at the existing programs, there's sort of large downstream mouse and potential. How much visibility do you have given the bolus of upcoming partner catalysts in the next 18 months?

Unknown Speaker: Yeah, I think, you know, it's kind of a combination of public and private information that we get in terms of our forecast. A lot of our partners have made public statements about when they expect to start, you know, phase two or phase three programs. So obviously, you can observe that. And then, in some cases, the partners have provided us with more detailed information about their plans.

Speaker Change: Yeah, I think, you know, it's kind of a combination of public and private information that we get in terms of our forecasts.

Speaker Change: A lot of our partners have made public statements about when they expect to start, you know, a phase two or phase three program. So obviously, you know, you can you can observe that. And then in some cases, the partners have provided us, you know, more detailed information of their plans. So

Matt Foehr: Now moving to slide number five, I'll start to review some of our business metrics for the quarter. We finished Q2 with 83 active partners. This includes two new platform lighting agreements that we signed in the quarter. Those are with Dan Biome and Topaz therapeutics. Notably, Topaz is a company focused on radio conjugates, and they represent the first of what we expect to be multiple partners focused on this space. I know it also that we mentioned in our earnings release that we issued this afternoon, that we expanded our existing successful discovery relationship with Hanoel Biopharma, and also recently completed New Deals with 92 Bio and the Memorial Phone Kettering Cancer Center.

Unknown Speaker: So I would say that we maybe have a little bit more visibility than the outside world based on some information that we get, although the information is not perfect. And, you know, we find out sometimes things change, right? Partners say that they're going to start something in the next quarter, and that changes. But we do get some additional information other than what's said publicly. And I'll add just a little.

Kurt Gustafson: I would say that we have...

Kurt Gustafson: You know.

Kurt Gustafson: Maybe a little bit more visibility than the outside world is based on some information that we get, although the information is not perfect, and we find out sometimes things change, right? Partner say that they're going to start something in the...

Kurt Gustafson: and that moves, but we do get some additional information other than what's in public. And I'll add just a little bit to that chat as well that generally speaking.

Unknown Speaker: And I'll add just a little bit to that, Chad, as well, that generally speaking, as things enter the clinic, that's when they start to become a lot more public and visible to investors. And I think this quarter, TEV 56278 is an example, right? That's a program for which there was not really public visibility until the program started. It was great to see Teva last week highlight it on their earnings call.

Kurt Gustafson: as things enter the clinic.

Kurt Gustafson: is when they start to become a lot more public invisible.

Matt Foehr: As I mentioned, given the velocity of New Deals and our growing book of business this year has the potential to be our best year ever in New Partner Ads. Now on slide number six, you'll see that our partnership base has grown by 30% over the last two years. And these numbers I know are net of attrition. The expansion in our partnership base has been driven primarily by the validation of our platform and by new technology launches, as well as much more recently by our expanded business development efforts.

Speaker Change: to investors. And, you know, I think this quarter that the TEV 56278 is an example, right, that that's a program for which

Kurt Gustafson: There was not really public visibility until the program started and it was great to see last we have a highlighting it on their earnings call, but again that's a program that was probably under the radar from a public perspective, but generally as things progress.

Unknown Speaker: But again, that's a program that was probably under the radar from a public perspective. But generally, as things progress out of preclinical and into phase one, that's when there starts to be a lot more visibility for the outside world on specific programs.

Kurt Gustafson: Out of preclinical and into phase one is when there starts to be a lot more visibility for the outside world on specific programs.

Unknown Speaker: Great. And yeah, this is obviously a benefit of your business model today, which is like an R&D sharing platform. But regarding the exploration, would you ever sell instruments directly to partners, just given the majority of the R&D investment has already taken place?

Matt Foehr: On the next slide, slide number seven, you can see the distribution of our partners on a geographic basis linked to the partner's headquarters location. Although I know that many of our partners' development programs are global in scope. Our partners are predominantly based here in the US with roughly equal representation between Europe and Asia. And over the past year, we've expanded our business development presence outside the US, and we expect that'll result in greater diversity within our partnership base.

Speaker Change: Great and yeah this is obviously a benefit of your business model today is like an R&D sharing platform but regarding the exploration would you ever sell instruments directly to partners just given the majority of the R&D investment has already taken place?

Unknown Speaker: Look, Chad, it's a great question. I think it's a topic that we should discuss, kind of discuss those plans transparently as they form. We have been approached by people who would like exploration instruments. We know it's deployable. We know it has broad application, and we know it drives efficiencies. So those are all things that I think create optionality in the business and things we can think about in the future.

Kurt Gustafson: Yeah, look, Chad, it's a great question. I think it's a topic that we would

Kurt Gustafson: Descartes.

Speaker Change: Discuss those plans transparently as they would form.

Matt Foehr: Slide H shows the number of active programs at quarter end, net of attrition. With a number of active programs increasing to 333, this represents a net ad of six programs on a sequential basis from Q1. During Q2, one program transitioned from discovery to the preclinical stage. One moved from preclinical to phase one and a third program advanced from phase one to phase three. Our partners continue to align and reprioritize their therapeutic programs and pipelines in their normal course of business.

Speaker Change: We have been approached by people who would like exploration instruments. We know it's deployable. We know it has broad application. We know it drives efficiencies. So those are all things that I think create optionality in the business and things we can think about in the future.

Unknown Speaker: Thanks for the questions, guys.

Speaker Change: Thanks for the questions, guys.

Chad Wiatrowski: Thanks, Chad.

Operator: The next question will be coming from Stephen Wiley from Skype. Stephen, go ahead.

Speaker Change: The next question will be coming from Stephen Wiley from Skypool. Stephen, go ahead.

Unknown Speaker: Yeah, good afternoon, guys. Thanks for taking the questions. I was just kind of wondering where the potential re-partnership of these CNS assets you're getting back from GSK and Roche fit within your current list of priorities, and were these development candidates that were in IND-enabling studies, is that the right way to think about where they were in the development stage? And I know you mentioned, you know, that you maintain co-ownership of the IP associated with the Glaxo small molecule, but is that also the case for the Roche asset as well?

Stephen Wiley: Yeah, good afternoon, guys. Thanks for taking the questions. I was just kind of wondering where the potential re-partnering of these CNS assets you're getting back from GSK and Roche fit within your current list of priorities? And were these

Matt Foehr: In our small molecule ion channel programs, during Q2, TSA realligned elements of its portfolio and decided to discontinue their work on the small molecule nav 1.1 sodium channel modulator program that was for rare epilepsy. GFK continues to advance a separate preclinical stage program with us for neurological diseases. And now to go into the close of the second quarter, Roche elected to return its rights to a small molecule program targeting KV7.2 following an additional internal portfolio review there.

Speaker Change: Development candidates that were in IND-enabling studies, is that the right way to think about where they were from a development stage?

Speaker Change: I know you mentioned that you maintain co-ownership of the IP associated with the Glaxo small molecule, but is that also the case for the Roche asset as well?

Matt Foehr: We continue to work with Roche on two additional small molecule ion channel programs for the potential treatment of CNF disorders. With our business model and our contractual terms in those deals, the KV7.2 and nav 1.1 small molecule programs are asked that we can re-partner with others in the CNF space. Chris, now on slide nine, you can see here the growth in our partners' preclinical and later stage programs, which are some of the programs that we think can be important to near term and midterm value generation in our pipeline.

Unknown Speaker: Yeah, Steve, thanks for the question. I characterize these from a stage perspective, as you know, kind of discovery class preclinical, right? I mean, especially in that small molecule space. You know, they're being tested in animal models and that sort of thing. So that's kind of how I would describe the stage.

Speaker Change: Yes, thanks for the question. I characterize these from a stage perspective.

Stephen Wiley: as you know, kind of discovery class preclinical, right? I mean, especially in that small molecule space.

Speaker Change: You know, they're being tested in animal models and that sort of thing, so that's kind of how I would describe the stage. We now have the ability to re-partner them. Again, these are both in the CNS space.

Unknown Speaker: We now have the ability to repartner with them. Again, these are both in the CNS space. And that's certainly something we have done in the past. If you look at our history, obviously, our core focus is technology, innovation, and development, and licensing our technologies. But often programs do come out of our technology development, and we've successfully licensed individual assets. In the past, we have some assets now that are available for license, and we pursue that, and so that's kind of a byproduct.

Matt Foehr: We experience 39% growth in the number of these programs over the last two years, and currently I've reached a total of 50 programs at these stages. Our pipeline is robust and it's growing. And we look forward to our partners' progress as they advance programs into the later stages of clinical development towards the market. As you can see here, now on slide number 10, as of June 30th, we have 32 active clinical programs and approved products.

Speaker Change: [inaudible]

Speaker Change: We've successfully licensed individual assets in the past. We have some assets now that...

Speaker Change: are available for license for which we pursue that and

Matt Foehr: During the quarter, I have to enter the clinic with TEV56278, which is an Omni Chicken derived TD-1 with IL fusion, IL-2 fusion. Last week, TEVA publicly highlighted ex vivo data for this program on their earnings call. Those data showed encouraging anti tumor T cell activity, and they stated that they believe the program has potential to open up additional combo therapy approaches. Based on discussions with our partners, and now with one already in the book, we continue to expect a total of four to six entries into clinical development for novel OmniAb derived antibodies this year.

Unknown Speaker: We don't plan on developing assets ourselves, but we do see these as prime candidates for potential repartnering. There's growing interest in some of these ion channel spaces. Obviously, we're more focused on the antibody side now, but there are folks who are focused on small molecules as well, so yeah, hopefully that gives you a little more.

Speaker Change: And so that is, that's kind of a byproduct. We don't plan on developing.

Matthew Foehr: and Matthew Foehr yourselves.

Speaker Change: But we do see these as prime candidates for potential re-partnering. There's growing interest.

Speaker Change: in some of these ion channel spaces. Obviously, we're more focused on the antibody side now, but there are folks who are focused on small molecules as well. So yeah, hopefully that gives you a little more color.

Unknown Speaker: Okay, and then maybe just kind of going back to the macro for a second. Just kind of curious. I mean, obviously, you talked about how some of these prioritization efforts within big pharma tend to be cyclical. There was obviously a large CRO out yesterday with some pretty cautious commentary around big pharma spending just on the discovery and outsourcing front. Do those. Do those happenings influence kind of where you spend your time from a BD perspective?

Speaker Change: Okay, and then maybe just kind of going back to the macro.

Speaker Change: for a second

Speaker Change: Just kind of curious to meet obviously you talked about how some of these prioritization efforts within Big Farma tend to be cyclical. There was obviously a large CRO yesterday with some pretty cautious commentary around Big Farma spending just on the discovery and outsourcing front.

Matt Foehr: Next slide, slide number 11 shows the wide and growing range of formats that our antibodies can support. And even though this list is quite broad as it currently stands, as we innovate around the platform and grow our partnership base, we continue to see the number of new formats expand. And although this slide is quite technical, it does really provide a nice illustration of the broad nature and the flexibility of our platform.

Speaker Change: Do those.

Speaker Change: Do those happenings influence kind of where you spend your time from a BD perspective?

Unknown Speaker: Um, you know, interesting. It's an interesting question, Steve.

Speaker Change: You know, interesting. It's an interesting question, Steve. And obviously, as I said, we see these cycles.

Matt Foehr: The most recent new format at the clinical stage is the attend you kind multi-specific with TEVA that I just mentioned and that entered the clinic in Q2. It's shown here on the lower part of the center panel.

Unknown Speaker: And obviously, as I said, we see these cycles. You know, a lot of our BD efforts, right? I can kind of maybe answer that in two ways. A lot of our BD efforts are now, you know, we're doing more and more outreach, but there's still a lot of inbound interest on our platform, which I think is, is a lot about as we continue to expand the platform as it becomes more validated.

Speaker Change: It's a lot of our BD efforts.

Speaker Change: Right, or maybe answer it in two ways. A lot of our BD efforts.

Matt Foehr: Now, on slide number 12, I'll highlight a few key recent and Q2 partner updates. GenMap announced initial data from the Phase II trial, evaluating Ackerson Lamab as monotherapy and in combination with Pembro, in patients with PDL1 positive, metastatic, non-small cell lung cancer. Data from this ongoing Phase II study informs their planned pivotal Phase III trial, which is expected to launch before the end of 2024. On recently announced your repeat approval of Sugamellamab in combination with chemo as first line treatment for metastatic non-small cell lung cancer, which is one of the largest cancer indications and is also among the leading causes of cancer deaths.

Speaker Change: are now, you know, we're doing more and more outreach, but there's still a lot of inbound interest on our platform, which I think it says a lot about as we continue to expand the platform as it becomes more validated.

Unknown Speaker: As we publish more papers and peer-reviewed journals, that tends to attract inbound interest. We have a nice mix in our portfolio now with our 83 partners of big pharmas, startup companies, and academics. So we kind of have an interesting vantage point on kind of where people are going. And so the way I would answer it is it informs not only our relationships, not only the BD that we do, but the innovation that we do as well.

Speaker Change: As we publish more papers in peer-reviewed journals, that tends to attract inbound interest.

Speaker Change: We have a nice mix in our portfolio now with our 83 partners of big pharmas, of startup companies, of academics.

Speaker Change: So, we kind of have an interesting vantage point on kind of where people are going. And so, the way I would answer it is that not only informs our relationships, not only inform the BD that we do, but the innovation that we do as well.

Unknown Speaker: And I think that drives interest. And one of the reasons I think we've been able to grow the business, both from partners and programs net of attrition, is because there's an understanding that we are continuing to innovate. And that I think attracts partners as well. So our dialogue, obviously, is, you know, there's a lot of forward-looking discussions with our partners, especially the larger ones. So they're kind of thinking downstream in a much more long-term discovery mindset, you know, despite, you know, a firm that might be looking differently at its existing portfolio or reprioritizing.

Matt Foehr: Also, these don't announce that it entered into a strategic commercial collaboration with Ewa Pharma. Under the terms of that agreement, Ewa Pharma has the commercial rights for Sugamellamab in Switzerland and 18 Central Eastern European countries. The Phase II presented preliminary data from its Phase I A first in human study of CSX1004, which is an investigational antibody for prophylaxis against fentanyl related overdose. Demonstrating that CSX-1004 is safe and well-tolerated under the conditions tested.

Speaker Change: And I think that drives interest, and one of the reasons I think we've been able to grow the business, both from partners and programs, net of attrition, is because there's an understanding that we are continuing to innovate.

Matt Foehr: In addition, and importantly, the exposure data were predictive of efficacy for blocking fentanyl-induced respiratory depression as well. At the next step, cessation is planning a phase two proof of concept study. I mentioned Ted's work earlier, and their clinical start is also highlighted here on this slide, and lastly, Alex disclosed FDA clearance of its IND application for ALTO-2, which is a Serp-Alpha targeting toll-like receptor agonist antibody conjugate in patients with advanced solid tumors.

Speaker Change: and that I think attracts partners as well. So our dialogue, obviously, is, you know, there's a lot of forward-looking discussions with our partners, especially the larger ones, and they're kind of thinking downstream.

Speaker Change: In a much more long-term discovery mindset, despite a firm that might be looking differently at its existing portfolio or reprioritizing it.

Unknown Speaker: Maybe just on the startup side, you know, when you're engaging with these earlier stage companies, and perhaps these companies have been formed around assets that are being discovered off your platform. How do you think about the economic return as it comes down to it? Taking a founder stake in equity versus trying to maximize downstream economics? Or do you feel like you can accomplish both of those things within a specific deal structure?

Speaker Change: Maybe just on the startup side, you know, when you're engaging with these earlier stage companies and

Speaker Change: Perhaps these companies are even being formed around assets that are being discovered off your platform. How do you think about, you know, the economic return as it comes down to

Speaker Change: Taking like a founder stake in equity versus trying to maximize downstream economics. Or do you feel like you can accomplish both of those things within a specific deal structure?

Matt Foehr: As you can hear on slide number 13, we look forward to numerous catalysts occurring for the balance of the year and in 2025. This is a subset of publicly disclosed events, and it represents a mix of clinical readouts, clinical starts, and regulatory events. And we continue to be excited about the progress that's being reported by our partners.

Unknown Speaker: Yeah, we do feel like we can accomplish both of those things. I will say, and as we commonly say, you know, you know, we have MPDs in mind for how we structure deals, but no two deals are alike, right? And so we pride ourselves on finding flexible structures that work for us and our stakeholders but also work for the partners as well. We are certainly open to things like taking equity stakes and those kinds of things. Certainly, I've had a history of that in our past management team.

Speaker Change: Yeah, we do feel like we can accomplish both of those things I will say, and as we commonly say, you know

Speaker Change: You know, we have MPDs in mind for how we structure deals, but no two deals are alike, right? And so we pride ourselves on finding flexible structures that work for us and our stakeholders, but also work for the partners as well.

Matt Foehr: And my last slide here, slide number 14, provide the current snapshot of the total milestone potential for our pipeline. And also calls out those 50 preclinical and later stage programs in our pipeline that I highlighted earlier as near-term and midterm value drivers. As you'll hear on the right side of this slide, those 50 programs at preclinical stage and later have over 550 million in potential milestones. And overall, our active antibody programs have over 3 billion in potential milestones, and currently the remaining active small molecule ion channel programs with Roche and GSK have approximately 700 million in remaining milestones.

Speaker Change: We are certainly open to things like taking equity stakes and those kinds of things.

Speaker Change: Certainly, I've had a history of that in our past, management team has, so we are open to those sorts of things.

Unknown Speaker: So we are open to those sorts of things. But yeah, we're excited about our mix of partners. I mean, we've added some pretty exciting startup companies in recent months here who really have, you know, interesting ideas, novel biology, proven management teams. And so all of those things kind of inform how we're thinking as we're finalizing a deal with a partner, but we are open to multiple kinds of structures. I think there are a lot of different ways that we can create value in a model like ours.

Speaker Change: But yeah, we're excited about our mix.

Jeff Goldblum: and Jeff Goldblum, our

Jeff Goldblum: finalizing a deal with a partner, but we are open to multiple kinds of structures. I think there's a lot of different ways that we can create value in a model like ours.

Kurt Gustafson: And with that, I will turn the call back over to Kurt for a discussion of our second quarter financial results. Kurt? Thanks, Matt. So I'll provide a brief overview of our financial results for the second quarter, and then we'll take some questions. On slide 16, we have our income statement for the second quarter of 2024 versus the year ago period. Total revenue for the quarter was 7.6 million compared with 6.9 million in the prior year quarter.

Unknown Speaker: Okay, thanks for taking the question.

Jeff Goldblum: Okay, thanks for taking the questions.

Operator: Then the last question is going to come from Connor McNamara from RBC Capital Markets.

Speaker Change: Thanks Dave.

Speaker Change: The last question is going to come from Connor McNamara from RBC Capital Markets. Connor, go ahead.

Unknown Speaker: Great. Thanks for the questions, guys. And just a question about 2025. In the press release, you talked about cash use going down significantly. How should we think about, you know, where the revenue step up comes from? Is that going to be, you know, will royalties start becoming more meaningful in 2025? Or is it going to be a similar mix with just more of the milestones coming through? Is there any comment you can make on how we should think about that in 2025?

Connor McNamara: Great. Thanks for the questions, guys. And just a question about 2025. In the press release you talked about cash use going down significantly. How should we think about, you know, where the revenue step-up comes from?

Kurt Gustafson: This revenue was consistent with our expectations with the exception of higher service revenue. Matt mentioned the discontinuation of the GSK small molecule ion channel program, and this triggered an acceleration of $1.3 million in service revenue above and beyond what would have otherwise been recognized in the quarter. GSK had paid for the service fees up front, which were recorded as deferred revenue and were being amortized over the life of the research term.

Speaker Change: Is that going to be, you know, do royalties start becoming more meaningful in 2025 or is it going to be a similar mix with just more of the milestones coming through? Is there any comment you can make on how we should think about that in 2025?

Unknown Speaker: Yeah, so there's two parts to that, Connor. You know, the first is, as I've talked about, the leverage that's built into this business. So we've kind of built the business to where it needs to be; we're staffed where we need to be. And so, you know, you won't see any sort of increase in operating expenses, barring inflation. In fact, you know, this year, based on our latest projections, operating expense will actually be down here in 2024, relative to 2023.

Speaker Change: Yeah, so there's two parts to that, Conor. You know, the first is, as I've talked about, the leverage that's built into this business. So we've kind of built the business to where it needs to be, we're staffed where we need to be, and so, you know, you...

Kurt Gustafson: The discontinuation resulted in the acceleration of this amortization, which would have otherwise been recognized mostly over the next two quarters. As I've previously stated, we continue to project milestone payments to be weighted towards the second half of the year, based on the information and statements made by our partners, partners. In terms of expenses, our R&D expense was relatively unchanged versus the prior year. GNA expense was $8 million versus last year's $8.7 million, with the decrease primarily due to lower share-based compensation expense, as well as non-recurring costs in the prior year associated with our ERP system implementation.

Speaker Change: You won't see really any sort of increase in operating expense, barring inflation. In fact, you know, this year, based on our latest projections, operating expense will actually be down here in 2024, relative to 2023.

Unknown Speaker: But in terms of, you know, what drives a substantial drop in the cash burn, it's a function of revenue and, more specifically, milestone revenue. So royalties, you know; right now, we're generating royalties from a couple of products over in China. We do note that one of the programs or one of those compounds just got approval in Europe. And so, you know, there could be something that goes there. But our projection for the kind of change is really a function of increased milestones.

Speaker Change: but in terms of, you know, what drives a substantial drop in.

Speaker Change: The Casperne.

Speaker Change: It's a function of revenue and, more specifically, milestone revenue.

Speaker Change: Royalties, you know, right now we're generating royalties from a couple of products over in China.

Speaker Change: Um...

Speaker Change: We do note that one of the programs, or one of those compounds, just got approval in Europe , and so, you know, there could be something that comes there, but our projection for kind of the change is really a function of increased milestones.

Kurt Gustafson: The amortization of intangibles in the second quarter was higher than our recent trend. The increase was due to a $1.2 million impairment related to assets associated with two legacy unpartnered ab initio programs. In addition, other operating income for the quarter included a $2.6 million reduction in contingent liabilities primarily related to changes in the ION channel programs. We have CVR obligations that expire in 2027 from our acquisition of ICAGIN, and we accrue these CVR liabilities based on our projections of achieving various milestones.

Unknown Speaker: As you think about those 50 things or so that Matt talked about that are currently in preclinical or clinical stages, as those move to the next stage, they'll trigger milestones. And that's what we think will be the primary driver.

Speaker Change: as you think about those 50 things or so that Matt talked about that are currently in preclinical or clinical stages, as those move to the next stage, they'll trigger milestones, and that's what we think will be the primary driver of that.

Unknown Speaker: Okay, great. And, and by the way, I, the disclosure, thanks for that. And the disclosure on the absolute dollar amount, I think that's the first time you've broken it out by stage, right? The three billion is broken out. So I think that's, that's helpful. Have you shown that?

Speaker Change: Okay, great. And by the way, I just closed, thanks for that. And the disclosure on the absolute dollar amount. I think this is the first time you've broken it out to a by state, right? The three billion is broken out, so I think that's helpful. Or if you've shown that data before.

Unknown Speaker: No, this was the first time we put that out there, so thanks for noticing. Well, thanks. Thanks for the call.

Speaker Change: No, this was, this was the first time we put that out there. So, thanks for noticing.

Kurt Gustafson: The recent notifications from GSK and Roch resulted in a decrease in our expected obligations for these CVRs, which was then recorded here and other operating income. Year to date, our operating expenses tracked relatively close to plan. However, we now expect total operating expenses in 2024 to be slightly less than total operating expenses in 2023. Turning to slide 17, here you'll see our balance sheet as of June 30, 2024. We ended the second quarter with $57.2 million cash, and as we've discussed before, we expect the first half of 24 to have a higher burn relative to the second half of the year, partly due to the milestone revenue being weighted towards the second half of the year, and partly due to the timing of cash payments from certain operating expense items that occurred in the first quarter.

Unknown Speaker: That's really helpful. And then, just quickly on that, you mentioned European approval. I mean, does that have any royalty revenue that flows through in 2024? Is that a smaller opportunity for you guys? Is there any way to quantify that? It's hard to know right now. I mean, Suga Malamad. It carries a 3% royalty on worldwide sales. You know, right, right now, that's a, you know, Seastone says they're looking for a partner for what I would sort of say, the EU; they do have a partner for Switzerland and Central Eastern Europe, in Iwo Farma; they announced that, but, you know, they don't actually, you know, they're not going to launch this themselves; they're looking for a partner.

Speaker Change: Well, thanks for the color. That's really helpful. And then just quickly on that, you mentioned the European approval. I mean, does that have any royalty revenue that flows through in 2024? Is that a smaller opportunity for you guys? Is there any way to quantify that?

Unknown Speaker: And they said that, you know, they would have updates soon. So I don't know, Connor, in terms of it. We'll have to wait and see, based on, you know, what partner they can line up. But I would say that that could drive incremental royalty income, but that's not part of sort of what we're forecasting at this moment.

Speaker Change: Right now, Seastone says they're looking for a partner for

Speaker Change: what I would sort of say, EU. They do have a partner for Switzerland and Central Eastern Europe .

Speaker Change: and you will form a, they announced that, but, you know, they don't actually, you know, they're not going to launch this themselves, they're looking for a partner and they said that, you know, they would have updates in themselves.

Connor McNamara: I don't know, Connor, in terms of, we'll have to wait and see based on, you know, what partner they can line up. But I would say that that could drive incremental royalty income, but that's not part of sort of what we're forecasting at this moment.

Kurt Gustafson: Given that we are still tracking close to our original plans, our cash guidance remains unchanged. And with that, I'd like to open the call for questions, operator. Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press star followed by the one on your table. We will hear it prompt that your hand has been raised. Should you wish to climb from the polling process, please press the star followed by the two. If you're using a speaker phone, please lift the hand side before pressing any keys. One moment please for your first question.

Unknown Speaker: Great. All right. Well, thanks. Thanks for the question, guys. I really appreciate it. And congrats on a solid quarter. Yeah, thanks, Connor.

Speaker Change: Great. All right. Well, thanks. Thanks for the question, guys. I really appreciate it. Congrats on a solid quarter.

Unknown Speaker: Yeah, thanks, Connor. Great, thanks, Connor. So it looks like that's our last question.

Speaker Change: Yeah, thanks, Gunnar. Great, thanks, Connor.

Unknown Speaker: So I'd like to thank everyone for participating in today's call and for your questions and engagement. We look forward to keeping you updated on our progress and speaking to you again in a few months. We will be at some upcoming conferences, including the H.C. Wainwright Conference in New York City next month and look forward to seeing some of you then. So, thanks again for your interest in OmniAb and have a great day.

Speaker Change: So it looks like that's our last question, so I'd like to thank everyone for participating.

Speaker Change: on today's call and for your questions and engagement. We look forward to keeping you updated on our progress and speaking to you again in a few months.

Speaker Change: We will be at some upcoming conferences, including the H.C. Wainwright Conference in New York City next month, and look forward to seeing some of you then. So thanks again for your interest in OmniAb, and have a great day.

Michael Sonntag: First question comes from Puntep Suta from Learnic Partner. Puntep, go ahead. Hi, you have Michael on for Punit, grass in the quarter. I think for the first question, I wanted to talk a little bit about the exploration platform. And I know you mentioned the proven concept study you've done. I was curious if you could talk about how this distributed format you're looking into fits into your overall offering. And to speak to the confidence in the microfluidics, single cell space recently.

Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your

Speaker Change: Ladies and gentlemen, this concludes your conference call for today and thank you for participating and ask that you please disconnect your lines.

Michael Sonntag: Yeah, Michael, thanks for the question. And yeah, the exploration platform is one that's obviously been woven into our technology offering for quite a while, you know, going back to acquiring it about four or five years ago. And it was a platform that also has, you know, broad applicability, to other areas as well. We've focused really on B-cell screening workflows, and it's one that's driven a lot of efficiencies within our business, and it's one where we've actually had some of our larger partners inquire with us about getting access to exploration instruments, and as we've invested in that platform to increase throughput and speed, we've come to realize that it's actually a form, you know, something that creates a lot of leverage in the business.

Michael Sonntag: You mentioned the IP landscape, you know, for us, this is a a micro-capillary platform. So, from the way in which the equipment is run, it is quite unique, and it actually, beyond being very efficient in screening, it can be paired with deep learning and AI and other things. That we've been doing for many years to really increase throughput. So, we're excited about the exploration platform. It's something we've obviously have invested in over the years and continue to leverage in a variety of ways for our partners.

Michael Sonntag: Okay, great. And then I was curious, you know, in conversations with new partners or existing partners, if you have any insights on, I get the appetite for discovery programs, given that the first half has been pretty good, funding wise, but then there's also a lot of talk about sort of the large pharma prioritization and happening. So, one if you could offer some color there. Yeah, yeah, Michael, I can comment and Kirk had as needed.

Michael Sonntag: Yeah, it's obviously as students of the industry, you know, it's clear that big pharma continues to go through prioritization exercises, which is natural. That's something that happens on a secular basis within the industry. But, you know, Q2 was quite strong for us in terms of new program starts and we actually have quite a variety of partners, right? It's a mix of big pharma and startups as well as academic partnerships as well.

Michael Sonntag: If I look at the landscape now as you compare it to about a year ago, you look at some of our newer partners who are quite well funded. These are startups that have funding, you know, solid VC funding, interesting biology, differentiated ideas and they're coming to us to get access to our platform. And we're definitely seeing that at a higher rate than we saw a year or even two years ago. So, that's generally good to see. And I think it is juxtaposed with prioritization exercises that go on at big pharma, but again, I think that's a natural part of the industry. Okay, thank you very much.

Chad Wiatrowski: The next question will come from Chad. Will you trust me from TD Cohen? Chad, go ahead.

Chad Wiatrowski: Hey guys, this is Chad on for Steve Ma. Just looking at the existing programs, there's sort of large downstream mouse and potential. How much visibility do you have given the bolus of upcoming partner catalyst in the next 18 months? Yeah, I think, you know, it's kind of a combination of public and private information that that we get in terms of our forecast. A lot of our partners have made public statements about when they expect to start, you know, a phase three program.

Chad Wiatrowski: So obviously, you know, you can observe that. And then in some cases, the partners have provided us, you know, more detailed information of their plans. So I would say that we have, you know, maybe a little bit more visibility than than the outside world is based on some information that we get, although the information is not not perfect, and, you know, we find out sometimes things change, right? A partner say that they're going to start something in the X quarter and that moves, but we do get some additional information other than what's publicly.

Chad Wiatrowski: And I'll add just a little bit to that, Chad as well, that generally speaking, as things enter the clinic is when they start to become a lot more public and visible to investors. And, you know, I think this quarter, the TV 5 6278 is an example, right, that's a program for which there was not really public visibility until the program started, and it was great to see last week to have a highlighting it on their earnings call, but again, that's a program that was probably under the radar from a public perspective, but generally as things progress out of preclinical and into phase one is when.

Chad Wiatrowski: And there starts to be a lot more visibility for the outside world on specific programs. Great, and yeah, this is obviously a benefit of your business model today is like an R&D sharing platform, but regarding the exploration, would you ever sell instruments directly to partners just given the majority of the R&D investment has already taken place. Yeah, look, Chad, it's a great question. I think it's a topic that we would discuss those plans transparently as they would form.

Chad Wiatrowski: We have been approached by people who would like exploration instruments. We know it's deployable, we know it has broad application, we know it drives efficiencies. So those are all things that I think create optionality in the business and things we can think about in the future.

Stephen Willey: Thanks for the questions, guys.

Stephen Willey: Thanks, Chad.

Stephen Willey: The next question will be coming from Stephen Wiley from Ste. Yeah, good afternoon, guys. Thanks for taking the questions.

Matt Foehr: We're just kind of wondering where the potential repartnering of the CNSS that you're getting back from GSK and Roch fit within your current list of priorities. And where these development candidates that were in I&D enabling studies is that the right way to think about where they were from a development stage. And I know you mentioned that you maintain co-ownership of the IP associated with the GLACSO small molecule, but is that also the case?

Matt Foehr: for the Roche, as well. Yeah, thanks for the question. I characterize these from a stage perspective as, you know, kind of discoveries, past, preclinical, right? I mean, especially in that small molecule space, you know, they're being tested in animal models and that sort of thing. So, that's kind of how I would describe the stage. We now have the ability to repartner them. Again, these are both in the CNS space. And that's certainly something we have done in the past.

Matt Foehr: If you look at our history, obviously, our core focus is technology innovation and development and licensing our technologies, but often programs do come out of our technology development. And we've successfully licensed individual assets in the past. We have some assets now that are available for license for which we pursue that. And so, that's kind of a byproduct. We don't plan on developing assets ourselves. But we do see these as prime candidates for potential repartnering.

Matt Foehr: There's growing interest in some of these ion channel spaces. Obviously, we're more focused on the antibody side now, but there are folks who are focused on small molecules as well. So, yeah, hopefully that gives you a little more color.

Matt Foehr: Okay.

Matt Foehr: And then maybe just kind of going back to the macro for a second. Just kind of curious. I mean, obviously, you talked about how some of these prioritization efforts within Big Pharma tend to be cyclical. There was obviously a large CRO yesterday with some pretty cautious commentary around Big Pharma spending just on the discovery and outsourcing front. Do those happenings influence kind of where you spend your time from a BD perspective?

Matt Foehr: You know, interesting. It's an interesting question, Steve. And obviously, as I said, we see these cycles, you know, a lot of our BD efforts, right, are I kind of maybe answer it in two ways. A lot of our BD efforts are now, you know, we're doing more and more outreach, but there's still a lot of inbound interest on our platform, which I think is as a lot about as we continue to expand the platform as it becomes more validated.

Matt Foehr: As we publish more papers and peer review journals, that tends to attract inbound interest. We have a night mix in our portfolio now with our 83 partners of Big Pharma's startup companies of academics. So we kind of have an interesting vantage point on kind of where people are going. And so the way I would answer it is it not only informs our relationships, not only inform the BD that we do, but the innovation that we do as well.

Matt Foehr: And I think that drives interest in one of the reasons I think we've been able to grow the business, both from partners and programs net of attrition, is because there's an understanding that we are continuing to innovate. And that I think attracts partners as well. So our dialogue, obviously, is there's a lot of forward looking discussions with our partners, especially the larger ones. And they're kind of thinking downstream in a much more long-term discovery mindset, just by a firm that might be looking differently at its existing portfolio or re-prioritize.

Matt Foehr: Then maybe just on the start-up side, you know, when you're engaging with these earlier stage companies and perhaps these companies you've been being formed around assets that are being discovered off your platform. How do you think about, you know, the economic return as it comes down to taking like a founder stake in equity versus trying to maximize downstream economics? Or do you feel like you can accomplish both of those things within a specific deal structure?

Matt Foehr: Yeah, we do feel like we can accomplish both of those things. I will say, and as we commonly say, you know, you know, we have NPVs in mind for how we structure deals, but no two deals are alike, right? And so we pride ourselves on finding flexible structures that work for us and our stakeholders but also work for the partners as well. We are certainly open to things like taking equity stakes and those kinds of things.

Matt Foehr: Certainly, I've had a history of that in our past management team as, so we are open to those sorts of things. But yeah, we're excited about our mix of partners. You know, we've added some pretty exciting start-up companies in recent months here who really have, you know, interesting ideas, novel biology. We've proven management teams and so all of those things kind of inform how we're thinking as we're finalizing a deal with a partner, but we are open to multiple kinds of structures. I think there's a lot of different ways that we can create value in a model like ours.

Stephen Willey: Okay, thanks for taking the questions.

Stephen Willey: Thanks, Steve.

Connor McNamara: Then the last question's going to come from Connor, Max Romero from Arvingsome Capital Market.

Connor McNamara: Connor, go ahead. Great. Thanks for the questions, guys. And in just a question about 2025, you in the press release, you talked about cash use going down significantly. How should we think about where the revenue step-up comes from? Is that going to be, you know, the royalties start becoming more meaningful in 2025 or is it going to be a similar mix, which is more of the milestones coming to us? Any comment you can make on how we should think about that in 2025?

Connor McNamara: Yeah, so there's two parts to that, Connor. You know, the first is, as I've talked about, the leverage that's built into this business. So, we've kind of built the business to where it needs to be, where staffed, where we need to be. And so, you won't see really any sort of increase in operating expense, borrowing inflation. In fact, you know, this year, based on our latest projections, operating expense will actually be down here in 2024 relative to 2023.

Connor McNamara: But in terms of, you know, what drives a substantial drop in the cash burn, it's a function of revenue and more specifically milestone revenue. So, royalties, you know, right now we're generating royalties from a couple of products over in China. We do note that one of the programs or one of those compounds just got approval in Europe. And so, you know, there could be something that comes there, but our projection for kind of the change is really a function of increased milestones.

Connor McNamara: As you think about those 50 things or so that Matt talked about that are currently in preclinical or clinical stages, as those move to the next stage, they'll trigger milestones. And that's what we think would be the primary driver.

Connor McNamara: Great. And by the way, the disclosure on the absolute dollar amount, I think this is the first time you've broken it out by stage, right? The three billion is broken out. So I think that's helpful. Or have you shown that data before? No, this was the first time we put that out there. So thanks for noticing.

Connor McNamara: Okay. Well, thanks for the color. That's really helpful. And then just quickly on that, you mentioned the European approval. Should we, I mean, does that have any royalty revenue that flows through the 2024s? That is that a smaller opportunity for you guys? Is there any way to quantify that? It's hard to know right now. I mean, Sugamalamab, it carries a 3% royalty on worldwide sales. You know, right right now, that's, you know, Seastown says they're looking for a partner for what I would sort of say EU.

Connor McNamara: They do have a partner for Switzerland and Central Eastern Europe in EUA Pharma. They announced that. But, you know, they don't actually, you know, they're not going to launch this themselves. They're looking for a partner and they said that, you know, they would have updates soon. So I don't know Conor in terms of, we'll have to wait and see. Based on, you know, what partner they can line up. But I would say that that could drive incremental royalty income, but that's not part of sort of what we're forecasting at this moment.

Connor McNamara: Great. All right. Well, thanks. Thanks for the question. I guys will appreciate it. Congrats on a solid order. Yeah. Thanks, Conor. Great. Thanks, Conor.

Kurt Gustafson: So it looks like that's our last question. So I'd like to thank everyone for participating on today's call and for your questions. And engagement will look forward to keeping you updated on our progress and speaking to you again in a few months. We will be at some upcoming conferences, including the H.C. Wainwright Conference in New York City next month and look forward to seeing some of you then. So thanks again for your interest in on the app and have a great day. Thank you.

Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating in the app that you please disconnect your voice.

Operator: Thank you.